4QFY22 NP of RM46.2m (+0.3% QoQ; +29.7% YoY), brought FY22 CNP to RM164.8m (+23.7% YoY). The result came in within expectation, representing 105%/106% of our/consensus full-year forecast. Despite a 14% QoQ decline in 4QFY22 revenue to RM576.9m, NP held up thanks to the lower effective tax rate to close FY22 on a new high. SKP extends its winning streak with another project win which will commence in 2023. Meanwhile, it has received approval for 1,000 foreign workers to kick start two previously won projects in 2QFY23. Maintain OUTPERFORM with a higher Target Price of RM2.10

Within expectations. 4QFY22 NP of RM46.2m (+0.3% QoQ; +29.7% YoY), brought FY22 CNP to RM164.8m (+23.7% YoY). The result came in within expectation, representing 105% and 106% of our and consensus full-year forecasts, respectively.

Results’ highlight. QoQ, 4QFY22 NP came in flat QoQ at RM46.2m while revenue fell 14.2% to RM576.9m which was largely expected coming off from a strong year-end sales season. 4QFY22 NP held up QoQ (after stripping out c.RM5m gain on land disposal) thanks to the lower effective tax rate. While the group had to account for prosperity tax in 4QFY22, it had at the same time qualified for reinvestment allowance which more than offset the tax impact. YoY, 4QFY22 CNP rose 29.7% on a 39.7% climb in revenue as the group continued to experience strong demand from customers. On a cumulative basis, FY22 revenue inched 3% higher to RM2.32b while CNP grew at a larger quantum of 23.7% to RM164.8m, reflecting the improved efficiencies and benefits of having an in-house PCBA supply.

New project pipeline. SKP continues its winning streak as the group secures another project win last December from its key customer which will commence production in early 2023. The other two projects that were previously secured will be slated to commence production in 2QFY23. Continuing the series of positive developments, the group has received official approval for its foreign worker submission and will be bringing in c.1,000 workers over the next three months. The additional workforce will come in handy as the group kick starts the two new products. The construction of a new 750k sq ft plant on a 6.4-acre land in Johor Bahru broke ground in Jan 2022 and is targeted to be completed by end-2022, increasing its total floor space by c.60%.

Maintain FY23E earnings and introduce FY24E earnings of RM194.4m.

Maintain OUTPERFORM with a higher Target Price of RM2.10 (previously RM1.90) based on 17x rolled forward CY23E PER (+0.5SD to 5- year mean).

Risks to our call include: (i) lower-than-expected orders, (ii) higher input costs, and (iii) labour shortage.

Source: Kenanga Research - 30 May 2022